So how do we know if the stock will continue to do well in the future? Well, we don't. And that's why I screen regularly and monitor the stocks I own on a weekly basis to ensure they're producing the numbers I expect to see. Sounds simple, huh? It's not and this is where it gets difficult for beginner investors.
They're usually just looking for that one sure thing. Unfortunately there's no sure things in life. There's just probabilities for success. That's a tough lesson that all successful investors have to learn and sometimes it can be a cruel lesson. This is why I always start with small initial investments and then build on those positions over time with the sale of options and the dividend reinvestment. It takes longer to get rich this way but it increases the probability that you'll eventually get rich.
So if I have the choice of buying shares in a company that's made money consistently over an extended period of time rather than just one or two years, I'll invest in the longer pattern of success every time.
My reason is I believe I'm not only investing in the company but in a management team that's developing, designing, and selling the product or brand. I like management teams that consistently make good decisions over a significant period of time because I believe they'll continue to make good decisions in the future. And the longer they've been doing this, the better. I believe that management that's been institutionalized into the culture of a company will continue to produce great results for its shareholders.
And I just want to be one of those shareholders.